De Beers Production to Peak in 2018

RAPAPORT... De Beers expects its production to hit a high point in 2018 as anumber of its mines approach the end of their life span, CEO BruceCleaver told Rapaport News. The company expects production of 34 million to 36million carats in 2018, up from the 33.5 million carats it unearthed last year.However, output will then slide to 32 million carats in 2019 and 2020, he said. The decline is due to its Venetia mine transitioning froman open-pit to an underground operation, while its Victor mine in Canada is dueto close in the first half of 2019. Some of its operations in Namibia will shutin the coming years, with De Beers also recently putting its South Africa-located Voorspoed mine upfor sale, Cleaver explained. "Global production is peaking, and will remain at theselevels without a significant increase for some time," he added. De Beers maintained a positive outlook for this year offthe back of stronger consumer demand for diamond jewelry in US and China in2017. Demand has picked up for certain polished categories that had struggledof late, including VVS-clarity stones, while the miner's retail unit, De BeersDiamond Jewellers, saw a strong December sales period, Cleaver noted. "Improving global macroeconomic conditions remainsupportive of consumer demand growth for polished diamonds in 2018," thecompany said in its 2017 earnings report Thursday. Even so, De Beers' revenue declined 4% to $5.84 billionin 2017, with rough sales declining 7% to $5.2 billion. Other revenue,including from the Element Six industrial-diamond unit, increased 20% to $600million, according to Rapaport calculations. The drop in rough sales reflected inflated demand forlower-value rough in early 2016 as sales volume increased, but the averageprice achieved during the year slid 13% to $162 per carat. De Beers said itsprice index measuring like for like diamonds increased 3% during the year. Meanwhile, its average cost per carat also fell, whichhelped buoy operating profit: Underlying earnings before interest, taxes,depreciation and amortization (EBITDA) grew 2% to $1.44 billion. EBITDA margin- a common measure of profitability - increased to 25% from 23%, reflecting a6% decline in costs to $63 per carat. Underlying earnings - after interest, taxes, depreciationand amortization - fell 21% to $528 million due to accounting changes at GahchoKu?(C)and Venetia, Cleaver explained.